EU Conflicts of Interest

Share this article:

Join the Discussion:

1 Comment

The nearly decade-long battle between the European Union and Microsoft took another turn earlier this month, as the EU Commission offered a fresh threat to Microsoft: Submit to our demands or face stiff new penalties. The item at issue is an aspect of the 2004 ruling against Microsoft, in which “the Commission fined Microsoft and ordered it to provide its competitors with information allowing them to develop workgroup server software interoperable Windows desktop operating system.”

That ruling is still under appeal in a Luxembourg court, but the Commission is pushing Microsoft to comply with the original terms of the decision before that appeal is resolved. The EU has given Microsoft until the beginning of April to comply.

The crux of the Commission’s argument is that the interoperability information that Microsoft holds is not sufficiently innovative to be protected as intellectual property, and therefore should be released free-of-charge to competitors. But as Ronald A. Cass rightly asks, “how can such critical information, which is not readily discovered by others, also be deemed obvious and of limited value?”

The fact that Microsoft has licensed Quest Software under its European Work Group Server Protocol Program shows that there is value in the information, such that according to Quest the agreement will allow it “to expand upon its innovative interoperability solutions for customers working across heterogeneous server environments, such as UNIX and Linux.”

Jim Prendergast, executive director of Americans for Technology Leadership, responded to the EU Commission’s threats by saying, “These actions are a de facto trade barrier for American companies who must continue to meet a higher standard of regulation across Europe.”

Again, Cass notes that the decision of the Commission’s antitrust office, headed by Neelie Kroes, “suggests that trade secrets (information that is not disclosed and not patented) are by definition without innovative content — and therefore unworthy of any significant fee.”

A WSJ editorial concurs and criticizes this move because it arrogates the authority of determining the validity of patents in addition to all its other claimed powers: “Brussels no longer acts as merely prosecutor, judge, jury and executioner in antitrust cases; it now claims the power to assess the worth of patents, too.”

What are some of the potential motivations for the EU Commission to take such steps? They are numerous. A giant corporation can be easily seen as a source of significant cash. The fines levied by the EU Commission could total more than $1 billion.

Then there is the perennial government instinct to expand the scope of its own powers. The Commission apprently bristles at any restriction of its authority.

Cass intimates that there is a larger trade issue at work. That is, EU officials want to put American companies at a competitive disadvantage by erecting “a de facto trade barrier.”

But there may be another aspect to this. Many EU governments are adopting open-source operating systems as cost-cutting moves. So, for instance, France announced late in 2006 that it would be moving from Microsoft to Linux (they recently decided on the Ubuntu distribution). The French government “believes it can save money using open-source software, despite the near-term costs of switching from Microsoft systems and retraining all employees.”

But those cost-savings could be hampered by Microsoft charging licensing fees for server interoperability. Novell has even noted that given the whole structure of licenses, fees, and costs associated with open-source software, “Microsoft is cheaper than Linux.”

Could the EU Commission be taking such an active role in reducing the costs of running Linux in order to reduce the costs paid by the constituent governments? That seems like a major potential conflict of interest and gives good reason to question the objectivity of the Commission in these cases. And if this is the case, it falls to the EU courts to uphold the integrity and objectivity of the rule of law in deciding Microsoft’s appeal.